'Catastrophic weather' sees Tower post $5.1 million first-half loss

Thursday, 25 May 2023

Tower has posted a $5.1 million loss, blaming it on the catastrophic weather events that struck the country at the start of the year.

The insurer’s reported loss for the six-month period ending on March 31 compared to a $3m profit for the same period a year ago.

In late January, torrential rainfall led to devastating flooding in Auckland. In February, Cyclone Gabrielle struck, causing widespread damage in the North Island.

The insurer’s chief executive, Blair Turnbull, said: “We are proactively managing climate-related weather impacts through risk-based pricing and product innovations, keeping pace with inflation via targeted rating and underwriting actions and addressing increasing vehicle theft with rating and excess changes.”

Tower was the first major insurer to introduce individual risk-based pricing for homes based on their risk of being damaged in earthquakes and flooding.

In 2023 Tower would expand its risk-based pricing model to include landslide and coastal hazards, Turnbull said.

“Advanced selection for landslide risks is already in place across New Zealand,” he said.

Insurance has been costing homeowners more as a result of rising claims and cost inflation.

Chairperson Michael Stiassny defended the move to make owners of homes more at risk of damage from events like earthquakes and floods pay more.

“Risk-based pricing is fairer from a customer perspective and is also in the best interests of our shareholders.”

And, he said: “Risk-based pricing is Tower’s best protection when it comes to ensuring continued support from reinsurers.”

Increasing crime levels, which have led to a political war of words between the Government and opposition, had prompted Tower to lift premiums for owners of the most commonly stolen models of cars.

“In the wake of increasing levels of motor crime, Tower has identified those vehicles subject to higher rates of theft and made appropriate changes to rates and excess charges,” Stiassny said.

Tower received $245m more in gross written premium from customers, which was an increase of 15% on the same period the previous year, including premiums collected from new customers.

Tower reported customer growth of 5%, and now has 320,000 customers.

Turnbull said the company was working efficiently to manage catastrophic events.

He said about 30% of claims for the Auckland and Upper North Island weather event and Cyclone Gabrielle, and 5% of claims for Cyclones Judy and Kevin in Vanuatu, had now been completed.

“These events are predominantly covered by reinsurance,” he said.

The cost to Tower for each of the New Zealand catastrophe events was limited to an $11.9m excess, while the estimated cost of the Vanuatu cyclones was $10m net of reinsurance recoveries.

Tower shares opened at $0.61, down just under 11% on the same time last year.

Turnbull said: “Now more than ever it is critical that New Zealand maintains a strong insurance industry for the future.

“Tower remains focused on careful risk selection and risk-based pricing, which is a fairer way to price insurance as customers only pay for the risks that apply to their property.”

Tower had completed the reinstatement of its reinsurance arrangements providing important protection from the volatility of large events.

Tower has cover for any potential third and fourth catastrophe event up to $889m in the financial year, Turnbull said.

The company remained on track to achieve a full-year underlying net profit after tax of between $8m and $13m.